Question

Fairborne Company borrowed $600,000 on an 8 percent, interest-bearing note on October 1, 2011. Fairborne ends its fiscal year on December 31. The note was paid with interest on May 1, 2012.

Required:
1. Prepare the entry for this note on October 1, 2011.
2. Prepare the adjusting entry for this note on December 31, 2011.
3. Indicate how the note and the accrued interest would appear in the balance sheet at December 31, 2011.
4. Prepare the entry to record the repayment of the note on May 1, 2012.